Ageing and employers’ perceptions of labour costs and productivity: a survey among European employers

Wieteke Conen, Utrecht University
Hendrik P. van Dalen, Netherlands Interdisciplinary Demographic Institute (NIDI)
Kène Henkens, Netherlands Interdisciplinary Demographic Institute (NIDI)

This paper examines employers’ perceptions of changes in the labour cost-productivity gap due to the ageing of the workforce, the effects of tenure wages and employment protect ion on the perceived gap, and whether a perceived labour cost-productivity gap affects employers’ recruitment and retention behaviour towards older workers. We analyse surveys administered to employers in Denmark, France, Germany, Italy, the Netherlands, Poland and Sweden. The results show that approximately half of employers associate the ageing of the personnel with a growing gap between labour costs and productivity. Both the presence of tenure wages and employment protection rules increase the probability of employers perceiving a widening labour cost-productivity gap due to the ageing of their workforce. A counterfactual shows that even when employment protection and tenure wage systems are abolished, 40 percent of employers expect a net cost increase. The expected labour cost-productivity gap negatively affects both recruitment and retention of older workers.